US consumer confidence continues to recover, but inflation remains the biggest concern

Overview

This report is Morgan Stanley AlphaWise's 77th US Consumer Pulse Survey, covering about 2,000 US consumers and conducted from June 18 to June 22, 2026. The core conclusion is that consumer confidence continues to recover from low levels, with household financial expectations improving more clearly, but inflation and living costs still pressure lower-income households and continue to skew consumption toward essentials.

Core views

The report believes US consumer sentiment is improving moderately: the net economic outlook rose from -18% two months ago to -10%, while the net household financial outlook rose to +24%. However, inflation concerns climbed to 60%, the highest level this year, and lower-income groups face more pressure in rent/mortgages, debt repayment, and late bill payments. On consumption, overall spending intentions remain positive, but category divergence is clear, with essentials outperforming discretionary spending such as consumer electronics. Current AI adoption is broadly stable, but usage frequency and future growth expectations are stronger among younger, higher-income, and white-collar groups.

Analysis framework

The report is based on a consumer questionnaire and uses net outlook indicators, calculated as the share reporting improvement minus the share reporting deterioration, to measure the economy, household finances, and spending intentions, with breakdowns by income, political affiliation, age, and occupation type. The analysis also compares month-over-month, year-over-year, and historical averages, and references the directional relationship with external consumer confidence indicators such as the University of Michigan Consumer Sentiment Index and the Conference Board Consumer Confidence Index.

Methodology notes

• Survey researchAlphaWise US Consumer Pulse Survey Issue 77

  Sample of about 2,000 US consumers

  The survey was conducted from June 18 to June 22, 2026, to track consumer behavior, attitudes, macro expectations, spending plans, and AI usage.

• Sentiment indicatorNet outlook score

  Share reporting improvement minus share reporting deterioration

  For example, the net economic outlook is the share of consumers expecting the economy to improve minus the share expecting it to worsen, and is used to measure directional sentiment changes.

• Segmentation analysisIncome and demographic breakdown

  Observing differences by income, age, political affiliation, and occupation type

  The report shows that the higher the income, the stronger the household financial outlook and travel intentions; lower-income consumers are more concerned about rent/mortgages and debt pressure; AI usage is higher among younger, higher-income, and white-collar groups.

• External cross-validationConsumer confidence index comparison

  Directional comparison with University of Michigan and Conference Board indicators

  The report notes that the survey's net outlook data has moderate correlation with external consumer confidence indicators and can serve as an early reference for broader changes in consumer sentiment.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• US macro and consumer confidence

  Core research focus

  Strengths

  Net outlooks for the economy and household finances have improved consecutively, and external consumer confidence indicators also show signs of improvement.

  Weaknesses

  The net economic outlook remains negative, indicating pessimists still outnumber optimists.

  Comparison

  The net economic outlook improved from -18% two months ago to -10%, while the net household financial outlook rose from +12% to +24%.

  Risks

  Inflation, the political environment, and geopolitical conflict may weaken the sustainability of the confidence recovery.

• Essential consumer categories

  Beneficiary direction

  Strengths

  Groceries, gasoline, and household goods continue to show net positive spending intentions.

  Weaknesses

  Part of the strength comes from price increases rather than real volume growth, especially for gasoline.

  Comparison

  Compared with discretionary categories such as consumer electronics, computers, and alcohol, essential consumption intentions are steadier.

  Risks

  If living costs continue to rise, consumers may further compress non-essential spending.

• Discretionary consumption and consumer electronics

  Pressure direction

  Strengths

  The net outlook for overall consumer spending remains positive, and apparel spending maintains a slight positive reading.

  Weaknesses

  Consumer electronics is the weakest category in this survey, and computers, alcohol, small appliances, and toys are also weak.

  Comparison

  Significantly weaker than essentials such as groceries, gasoline, and household goods.

  Risks

  Inflation and debt pressure may continue to suppress discretionary spending among low- and middle-income groups.

• Travel and leisure activities

  Selective beneficiary direction

  Strengths

  Travel intentions for the next 6 months rose to 63%, and participation in out-of-home activities rebounded this month.

  Weaknesses

  Both domestic and international travel spending outlooks are net -1%, indicating spending intensity is not strengthening in tandem.

  Comparison

  Travel intentions are above 58% in the previous survey and 61% in the same period last year, but the report notes normal seasonal declines may follow.

  Risks

  Income divergence and seasonality may cause travel demand to weaken in the second half of the year.

• Consumer credit and payment capacity

  Risk monitoring direction

  Strengths

  Higher-income households are more likely to report improved payment capacity, and mortgage and mobile phone bill payments receive higher priority.

  Weaknesses

  In the past 3 months, 32% of consumers had at least one late/missed bill or loan payment, with the proportion reaching 41% among lower-income groups.

  Comparison

  The late-payment rate for higher-income groups is 21%, significantly below that of lower-income groups.

  Risks

  If inflation and living costs remain elevated, pressure from debt repayment, rent/mortgages, and late payments may rise further.

• AI applications and software ecosystem

  Thematic growth signal

  Strengths

  About half of consumers use AI at least weekly, 42% expect personal usage to increase, and 34% of employed adults expect workplace usage to increase.

  Weaknesses

  About one-quarter of consumers have never used AI, and views on AI's societal impact are close to balanced rather than one-sidedly optimistic.

  Comparison

  Weekly work usage is 67% for white-collar workers, above 42% for blue-collar workers; current weekly AI users are more optimistic about the long-term impact.

  Risks

  Differences in age, income, occupation, and political affiliation may affect the pace of AI penetration and social acceptance.

Key data

• Survey scopeIssue 77, about 2,000 US consumers, June 18 to June 22, 2026Used to measure consumer behavior, attitudes, and future outlook.
• US economic outlook for the next 6 months34% expect improvement, 44% expect deterioration, 22% expect no change; net outlook -10%The net outlook improved from -14% last month and -18% two months ago.
• Household financial outlook for the next 6 months46% expect improvement, 22% expect deterioration, 33% expect no change; net outlook +24%Continued improvement from +19% last month and +12% two months ago.
• Inflation concerns60%The highest level this year, above 59% last month and the January low of 53%.
• Other major concernsPolitical environment 42%, geopolitical conflict 25%, rent/mortgage 25%, debt repayment 24%Concerns about the political environment, rent/mortgages, and debt repayment increased from the previous survey.
• Overall spending outlook for next month33% expect spending to increase, 13% expect it to decrease, net outlook +20%Below last month's +23%, but above +15% in the same period last year and the survey average of +16%.
• Household expenses and debt pressure22% said it improved versus last year, 45% saw no change, 33% worsenedAmong households earning $100K+, 32% improved, versus only 16% among households below $50K.
• Late bill or loan payments32% of consumers had at least one late or missed bill/loan payment in the past 3 months41% for low income, 30% for middle income, and 21% for high income; the wording change in Issue 77 may affect trend comparisons.
• Consumer category divergenceGroceries, gasoline, and household goods are positive; consumer electronics are the weakest, apparel net outlook +1%Essentials continue to outperform discretionary categories.
• Travel intentions63% plan to travel in the next 6 monthsAbove 58% in the previous survey and 61% in the same period last year, though it may later decline due to seasonality.
• AI usage frequencyAbout half of consumers use AI at least weekly in personal and work settingsAbout one-quarter of consumers have never used AI; weekly work usage is 67% for white-collar workers versus 42% for blue-collar workers.
• Future AI usage expectations42% expect personal AI usage to increase; 34% of employed adults expect workplace AI usage to increaseGrowth expectations are stronger among current heavy users, younger people, and higher-income households.
• Views on AI's societal impact35% believe future generations will benefit from AI, 36% believe things will worsenCurrent weekly AI users are more optimistic, with 53% believing future generations will benefit.

Impact & implications

For investment and macro judgment, the report conveys a consumer picture of "moderate recovery but still meaningful constraints." Improving consumer confidence and household financial expectations support resilience in services, travel, essential consumption, and online spending, but inflation, cost of living, and payment pressure on lower-income groups limit discretionary spending elasticity. By category, groceries, gasoline, and household goods are more defensive, while discretionary categories such as consumer electronics, computers, small appliances, and toys still face demand pressure. On the AI theme, current usage frequency is stable but future growth expectations are clear, indicating further room for expansion in consumer-side AI penetration.

Risks

• Inflation concerns have risen to the highest level this year and may continue to pressure real purchasing power and consumer confidence.
• Lower-income consumers face more visible pressure in rent/mortgages, debt repayment, and late bill payments, which may widen consumption divergence.
• Although the net economic outlook has improved, it remains negative, indicating overall macro confidence has not fully recovered.
• Demand for discretionary categories such as consumer electronics, computers, small appliances, and toys is weak, posing inventory or sales pressure.
• The improvement in travel intentions may be affected by seasonality and may not continue into the second half of the year.
• The wording of the bill/loan payment question changed in Issue 77, so related historical trend comparisons should be treated cautiously.
• Views on AI's societal impact are highly divided, and the long-term adoption path may be affected by trust, age, and income differences.

What to watch

• Whether the net outlook for the US economy and household finances can continue to improve in the next few surveys.
• Whether concerns about inflation, groceries, living costs, and gasoline prices fall back from around 60%.
• Whether rent/mortgage, debt repayment, and late bill indicators worsen for lower-income consumers.
• Whether the gap in spending intentions between essential and discretionary consumption widens.
• Next-month and next-6-month spending outlooks for categories such as consumer electronics, computers, apparel, and travel.
• Whether University of Michigan and Conference Board consumer confidence indicators confirm the improving trend seen in the survey.
• Whether AI usage rates in personal and work settings accelerate over the next 12 months as the survey expects.